The part you have circled in the pic is the centering nut. It only serves to tighten the union of the shafts. When you turn the shafts by hand do you see actual movement at the union? If you have actual movement at the union I'd say you'll be needing a new (or from the breaker) set of shafts.
I would be looking at the carrier bearing (center mount). Does the shaft have up/down movement or side to side when you wiggle it by hand? The rubber of that mount will deteriorate and allow the shaft to move but due to the steel "wrap" of the mount body you cannot see the condition of the rubber with the shaft in the tunnel.
If time allows I'll try to get a peek at the shaft union on the 560 today to see how much of the spline is visible - for comparison.
Keep us posted.
'73 280SEL 4.5 (9/72)- RIP
Only 8,173 units built from 5/71 thru 11/72
'02 CLK320 Cabriolet - wifey's mid-life crisis
2012 VW Jetta Sportwagon TDI...at least its a diesel
Non illegitemae carborundum.